United States: A Smooth Patch In A Rough Road? Governmental Transition And Intellectual Property

Whenever a new Congress convenes, some IP issues come to the fore while others take a back seat. Transition to a new administration in the executive branch brings about even more significant IP change, and this effect is compounded when a new political party takes charge. Understandably, IP issues have not been making headlines in this post-election cycle, being overshadowed by issues such as controversial executive orders, cabinet nominees, and judicial nominations. Nonetheless, there has been a great deal of activity on both the outgoing and incoming sides, and looking at it all in one place may give us a sense of what is likely to come in 2017 and beyond. Let's start with a sampling of the late 2016 developments.

In December, the House Judiciary Committee published a one-page Reform of the Copyright Office document that was as notable for what it did not contain as it was for what it proposed. Back in October, the press was abuzz with reports that the newly appointed Librarian of Congress essentially fired the head of the Copyright Office (the Register of Copyright) for copyright policy reasons. The Librarian, Dr. Carla D. Hayden, had been appointed by President Obama and replaced James Billington, who held the post from 1987 to 2015. The timing of the new appointment coincided with an effort to make the Office more independent from Congress, with some calling for it to move from the legislative branch to the executive branch. The Judiciary Committee started the document by acknowledging that the current statutory framework for the Office is outdated and that the Office should be able to "provide independent and timely advice to Congress" and "have autonomy over its budget and technology needs." After that, however, the "reform" suggested by the document seems more intended to prevent the exercise of independence by the Office. First, the Committee reasserted that the Office should remain part of the legislative branch. Next, it advocated that not only the Librarian of Congress, but the Register as well, be subject to nomination/consent, essentially stating that Dr. Hayden should not attempt to name a new Register herself. Further, the Committee suggested that various committees be formed to "advise the Register on critical issues." In still a further effort to consolidate power, the Committee suggested that a "small claims system" be hosted by the Office to manage both low value infringement disputes as well as bad faith takedown notices under 17 U.S.C. § 512.

Also in December, the executive branch's Intellectual Property Enforcement Coordinator submitted to Congress a New Joint Strategic Plan on Intellectual Property Enforcement. This 163-page document is styled as a forward-looking enforcement outline for 2017–19. The Joint Strategic Plan is broken down into four sections. The first section contains a highly detailed explanation of the economic aspects of IP, as well as examples of business models that rely on IP infringement. The second section deals with online IP issues, including details regarding practices and policies to curb abusive activities. The third section outlines how the government is seeking to stem illicit trade via counterfeit and pirated products. The final section is focused on bigger-picture issues regarding IP enforcement. Those interested in these topics will find the Joint Strategic Plan contains a great deal of information on piracy and counterfeiting methods that may not otherwise be known to anyone but specialists. For instance, it explains and illustrates what a "game copier" is, a device that takes a software protected video game, bypasses security measures, and creates unauthorized copies. A lower-tech example is an illustration of counterfeit Duracell batteries covered with a plastic wrapper that makes them appear (for border-crossing purposes) to be merely off-brand batteries. Once on-shore, the coverings are removed and the batteries are sold as if they were the legitimate name-brand product. The danger of such goods is illustrated vividly, with exploding, counterfeit hoverboards and counterfeit bicycle helmets that dramatically failed safety tests. The Joint Strategic Plan urges what it terms a "Whole of Government" approach to IP enforcement that goes far beyond standard Customs policies. For example, the Joint Strategic Plan urges that the government, in its own procurement/acquisition activities, promote supply-chain accountability. It suggests that the government undertake policies that encourage the innovation that takes place in universities. And it emphasizes the unique resources the government has to help stem trade secret misappropriation (which the Joint Strategic Plan universally styles as trade secret "theft" for emphasis on its economic impact).

The IPEC's FY16 Annual Report on Intellectual Property Enforcement, transmitted to Congress on January 12, 2017, is a 103-page counterpart to the Joint Strategic Plan but looks back on the past year rather than forward. The emphasis in the Annual Report is that the government needs to lead by example (e.g., carefully look for counterfeit products entering the supply chains of the military and the federal government in general). Lest all of IPEC's activities be viewed as promoting the interests of IP owners, significant consideration is given to the rights of other stakeholders as well. For example, the Annual Report emphasizes the importance of fair use and the exercise of due care so that government enforcement approaches do "not discourage people from building appropriately on the copyrighted works of others." The Joint Strategic Plan and the Annual Report thus serve as a highly detailed tutorial to help guide the new administration on some of the more important aspects of IP.

Moving from examples of what was done before Inauguration Day to what is likely to happen in the future, we look first to the patent front. While initial reports strongly suggested that Michelle Lee would be replaced as Director of the U.S. Patent and Trademark Office, it now appears that she might remain at her post under the new administration. There has been no official announcement as of yet, and the Department of Commerce leadership webpage lists the position of USPTO Director as "Vacant." However, several sources, including Representative Darrell Issa (R-CA), confirm that President Trump has decided to keep Lee on as Director. Issa, who holds 37 patents himself, has been a vocal supporter of Lee, calling her "one of the great things to come out of the Obama era" and telling a crowd at January's Consumer Electronics Show that "we just have to get Michelle to stay on long enough to finish what she started."

If Lee does not remain at her post, there may well be a gap between appointed directors that could last through the summer, particularly given the federal hiring freeze that the president ordered soon after taking office. Lee herself was not officially sworn in as Director of the USPTO until March 12, 2015 – two years after the last appointed and confirmed Director, David Kappos, resigned and 18 months after the subsequent Acting Director, Teresa Stanek Rea, resigned. With many cabinet and subcabinet positions to fill, recent first-term presidents have taken several months before appointing new USPTO Directors. And who the new administration might tap to replace Lee is anyone's guess; little was said about the patent system during the campaign, and the new administration has yet to comment publicly on possible successors. Most experts, however, predict a nominee that supports strong IP rights. Rumored successors include former Federal Circuit Chief Judge Randall Rader, Johnson & Johnson's vice president of IP policy and strategy, Philip S. Johnson (past president of the Intellectual Property Owners Association), Fish & Richardson principal Michael McKeon, and former USPTO Deputy Director Stephen Pinkos. Both Rader and Johnson have confirmed their interest in the position, with Rader saying that his "top priority is to 'make patents great again'" and Johnson announcing his intention to "continue serving the IP community" when he retires from Johnson & Johnson in February.

Less uncertain in the IP world is the fate of the Trans-Pacific Partnership, President Obama's signature trade deal. Both major party presidential candidates were highly critical of the TPP during the 2016 campaign, with President Trump calling it a "death blow for American manufacturing." In keeping with his promise to abandon the trade deal upon entering office, President Trump signed an executive order during his first week in office withdrawing the United States from the negotiating process, calling the move "a great thing for American workers."

The new administration's opposition to the TPP is unsurprising given its strong territorial views and protectionist approach to trade, but abandoning the trade agreement will likely have profound implications for IP. Chapter 18 of the TPP addresses the protection and enforcement of IP and contains numerous substantive provisions addressing all areas of IP. The TPP standardizes the term of copyright protection to the life of the author plus 70 years and adopts a two-part fair use analysis that requires member countries to balance the interests of rights holders and users of copyrighted works. With respect to patents, Chapter 18 adopts a 12-month grace period for the applicant's own disclosures and makes patent term adjustment available for delays in prosecution or market approval for pharmaceuticals. And on the trademark front, Chapter 18 presents a broadening definition of eligible subject matter by expanding the scope of protection to cover sound marks and requiring member countries to make "best efforts" to register scent marks. Finally, it contemplates strong trade secret protection by criminalizing trade secret theft. Though its proponents argue that the TPP's IP provisions would strengthen protections available to rights holders and boost economic growth in its member countries, the immediate abandonment of the deal suggests that the new administration could take a drastically different approach to trade than President Obama. All that said, the TPP faced an uphill battle even during the Obama administration, so the actual change in policy from abandonment of the TPP proposal is modest at best.

Shortly after his inauguration, President Trump announced two new measures that could place significant constraints on the federal IP system: a "one in, two out" order curtailing federal regulations and a plan to defund the National Endowment for the Arts. As to the former, it is unclear for example what rationale might exist for forcing the USPTO to find two regulations to remove if it wants to clarify by regulation some procedure to be used in Patent Trial and Appeal Board proceedings. The result may well be that ambiguities in USPTO practice do not get clarification during this period. As to defunding the NEA, that endowment provides the bulk of funding for volunteer lawyers for the arts programs, such as those recently added as a result of the America Invents Act's mandate that the USPTO "shall work with and support intellectual property law associations across the country in the establishment of pro bono programs designed to assist financially under-resourced independent inventors and small businesses." Without funding from the NEA, these organizations could cease to operate and render the USPTO, part of the executive branch, unable to comply with the congressional mandate, and therefore vulnerable to possible legal action.

Even with these changes, the developments in IP policy that are occurring as a result of the November election are not likely to be nearly as dramatic as in other policy areas. Thus, IP practitioners and their clients can find some solace that they need merely continue worrying about such "mundane" issues as subject matter eligibility for patents, whether the USPTO should engage in what some call "censorship" in examining marks for registration, the extent to which three-dimensional scans of objects should be subject to copyright protection, and whether an employee's LinkedIn contact list constitutes a trade secret of the employer.

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